Italy:
Only the full Monti will do

Berlusconi’s agony has brought down markets and pushed Italian bonds’rates above 7 per cent, threatening a credit crunch that would sink the whole eurozone. The only foreseeable solution is to quickly set up a unity government led by the widely respected former EU commissioner, writes La Stampa's editor in chief.

At 7 p.m. Italian President Giorgio Napolitano played his trump card, the one he’d held in abeyance for some time: The name of the card was Mario Monti.

Yesterday’s dramatic day, by far the worst for Italy since the lira was plunged into crisis in 1992, required a hard-nosed response, a sign that contained the ingredients of both antidote and warning.

The antidote was against the collapse of the system, the warning issued to politicians to make them see that time has run out. There’s no more room for digressions, distinctions, postponements and poker games. Markets, analysts, and global mass media have shouted aloud together and with fierce determination to try to make Italy understand that its credibility is almost completely shot and that its only hope is a strong sign that shows a willingness to break from the past.

Now, Mario Monti is no longer just a technocrat. He’s a senator-for-life whose nomination also carried Prime Minister Silvio Berlusconi’s signature, as well as his praise. Now, Mario Monti has been clearly anointed as the figure parliamentary forces can turn to in search of the political conditions necessary to build a new government.

High on Byzantine-like spices

Yesterday evening’s decision didn’t lack for unknowns. It’s still not clear whether Italy can avoid early elections. But the move did suggest potential openings. It above all pushed all those involved to take responsibility for the situation at hand and respond by telling the country precisely what they have in mind, minus the usual shrewdness and tactical sidebars.

The financial firestorm that hit Italy yesterday, which many analysts say has already passed the point of no return, infected and undid markets the world over, scaring pension fund holders and veteran speculators alike. All this happened as a result of Italy’s old vices.

Some people yesterday were stunned by the global reaction. Hadn’t Italy copied the Spanish model? The prime minister had promised to resign. Both the majority and opposition in parliament had publicly agreed on the EU mandated measures necessary to combat the crisis as well as pledging to look ahead to national elections.

Why then did Jose Luis Zapatero’s Spain seem to come out of the tunnel while Italy instead seemed to remain stuck speeding inside it? The reason is that our packages were low on clarity and high on the Byzantine-like spices that rendered what we’d agreed upon nearly incomprehensible.

A clean sweep of strategems

Put yourself in the shoes of a foreigner, whether an investor, journalist, diplomat or analyst, and you’ll see what they saw and understand why they were gripped by panic. Zapatero announced his resignation and resigned. Done. Italy instead managed to come up with a new procedure called “deferred resignation” in which the “when” isn’t clear and even the resignation hasn’t even been confirmed in writing.

Then there’s the so-called “maxi-amendment” to the stability law, a deal intended to ensure that Italy respects the promises it made to Europe. Too bad that by yesterday morning no one knew the amendment’s contents, not even the president of the country. He hadn’t yet been given the privilege of reading it.

Finally there’s the election date. Spain specified it immediately. In Italy, we’ll know only after Berlusconi steps down, vaguely set for the end of the month. But the political consultations that follow can still yield any number of possible results, some of them contradictory: A government led by technocrats; early elections; a turn-around; an executive managed by the People of Freedom (Berlusconi’s party): In other words, all the ingredients for an unmanageable situation.

Yesterday morning, Italy’s political structure, in love with and kidnapped by its old rites, was ready to plunge headlong into negotiations, bartering, as always seeking convenient ways out at the expense of the citizenry. But Napolitano’s move regarding Monti has made a clean sweep of strategems and tactics. It forces everyone to confront the seriousness of the situation. It makes them show their hands and what they’re bringing to the table in an effort to meet the challenges ahead.

Translated from the Italian by Christopher P. Winner

Debt crisis

Italy falls victim to Greek syndrome

The announcement that Silvio Berlusconi will shortly resign did not have the desired effect on financial markets, which are preparing to give Italy what Handelsblatt’s front-page headline terms “shock therapy”. The German business daily reports that "the yield on Italian 10-year bonds soared to a record high of 7.46 % yesterday [9 November] — an increase that is enough block Rome’s access to financial markets.”

The signal to investors who continue to guarantee the financing of the Italian state is clear: "the problems of this country are bigger than the problem of Berlusconi". If Italy is forced to pay 8% instead of 5% to its bond holders, the burden of interest weighing on the country will increase by 635 billion euros over the next 10 years, which, Handelsblatt argues, “will put a crushing strain” on the country.

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